Greek philosopher Heraclitus who wrote about the nature of change in his book Fragments once stated that the only constant in this world is change. We adhere to his philosophical thinking and we advocate change if and when the chosen modification is the best possible proposition among the selections. We were elated when the Axelum Resources Corporation (AXLM) announced that its board approved a measure to reallocate P350 million of the Initial Public Offering (IPO) proceeds from the global network expansion to product development, marketing expenses and capital expenditure. The justification for the reallocation of the IPO proceeds is that it makes available supplementary financial resources to the aforementioned business activities that are needed by management in implementing the business objectives. Through its associate company the AMDG Foundation, AXLM acquired the San Isidro Polymedic General Hospital – a leading secondary–level hospital in Gingoog City, Misamis Oriental. The hospital is furnished with a 100-bed capacity and offers comprehensive professional healthcare services which include but not limited to surgery, neonatal, radiology, pharmacy, laboratory, diagnostics, hemodialysis, intensive care, delivery rooms, outpatient clinics and emergency services. Some trading and market participants would argue that a reallocation of the IPO proceeds should be considered as a red flag since AXLM would be breaking its own rules as stated in its prospectus describing the original use of the IPO proceeds and other related information that an investor could use when deciding whether or not to invest. Although we have not come to an agreement with these trading and market participants as long as the purpose of the reallocation of the IPO proceeds is to ensure that the business operations could generate the highest possible return at the lowest possible risk, the corporate action made by AXLM neither created operational nor financial synergies. It is worth mentioning that AXLM is engaged in the manufacturing of coconut products such as coconut oil, coconut milk, coconut water, sweetened coconut and dehydrated coconut among others. No matter how eloquent the press release of AXLM is regarding the acquisition of the San Isidro Polymedic General Hospital, the fact remains that the reallocation of the IPO proceeds is a wrong move. Based on Investopedia.com, business synergy is the concept that the combined value and performance of merged companies would be greater than the sum of the separate companies. If that is the case then where are the operational and financial synergies in this corporate action?
